Telecommunications Infrastructure - Hong Kong s Competitive Edge. M H Au Deputy Director-General Office of the Telecommunications Authority
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1 Telecommunications Infrastructure - Hong Kong s Competitive Edge M H Au Deputy Director-General Office of the Telecommunications Authority 1
2 Competitiveness Stable political environment Rule of law Free flow of capital Tax system, rental level, wage level Expertise, skills, language proficiency Geographical location. Telecommunications Infrastructure 2
3 Our Competitors Phenomenal growth in optical fibre capacity and reduction in transmission cost 1990 Hong Kong-Japan-Korea cable: 280 Mbps 2001 C2C cable: initial capacity 160,000 Mbps; upgradable to 7,680,000 Mbps Therefore geographical location not important in choice of location for a telecommunications hub 3
4 Our Competitors (Cont d) Telecommunications cost, capacity and quality: key factors in selecting location of regional hub multinational corporations Internet content: original content cache site Likely competitors of Hong Kong: Japan, Singapore, Australia, Shanghai, other two dragons (South Korea, Taiwan) 4
5 External Communications Original exclusive licence to last until end- September 2006 Negotiation with Hong Kong Telecom for early termination from end-march 1998 Compensation to Hong Kong Telecom: HK$6.7 B in 1998 External services competition from Jan 1999 External facilities competition from Jan
6 External Communications (Cont d) IDD price reduction as a result of services competition from Jan1999 is well recognised External facilities competition from Jan 2000 has led to significant investment in new submarine and overland optical fibre cables and substantial reduction (at least 50%) reduction in prices for international private leased circuits so far 6
7 External Communications (Cont d) Before external facilities competition, total submarine cable capacity available to Hong Kong was 44 Gbps New submarine cables landed or about to land to add 480 Gbps initial capacity: East Asia Crossing (1Q 01) 80 Gbps APCN2 (3Q 01) 80 Gbps C2C 160 Gbps Flag/Level 3 80/80 Gbps 7
8 External Communications (Cont d) New overland cables to Mainland Second fibre ring (June 2000) 5 x 2.5 Gbps Third fibre ring (1Q 2001) 3 x 2.5 Gbps China Unicom fibre ring (December 2000) 4 x 2.5 Gbps China Netcom/Far East Gateway cable 2 x 2.5 Gbps CLP Telecom cable 1 x 2.5 Gbps Hong Kong is well positioned to be one of Mainland s gateways to the world 8
9 External Communications (Cont d) Singapore Full liberalization brought forward from 1 April 2002 to 1 April 2000 Foreign ownership restriction (previously 49% max.) lifted from January 2000 Liberalization also brought about landing of new submarine cables (AGC, C2C, APCN2 but not initially FNAL and Tiger) Well positioned as hub to ASEAN region 9
10 External Communications (Cont d) Australia Network competition from 1992 Full liberalization from 1997 Geographical location off-region Japan Full liberalization (further deregulation since 1998) Most Asia to US cables routed through Japan (available initial capacity 760 Gbps) 10
11 External Communications (Cont d) Shanghai China US cable 80 Gbps Mainland about to become WTO Member Foreign ownership restriction 49% Regulatory system being developed Taiwan and South Korea Progressive liberalization Strong manufacturing industry backing South Korea reported to have highest broadband household penetration rate: 39% 11
12 External Communications (Cont d) Initiatives in Hong Kong Full liberalization from 1 January 2003 (at present, new External Facilities Licence cannot be based on Indefeasible Right of Use (IRU); such restriction to be lifted) External facilities operators may build their own backhaul from 1 January
13 Local Fixed Communications 4 wireline local fixed networks from July 1995 Cable television operator licensed to operate cable modem service from January 2000 Five wireless local fixed networks licensed 1Q 2000 Universal service achieved Fixed line penetration 57% Singapore 48% Australia 60% 13
14 Local Fixed Communications (Cont d) New wireline local fixed network operators have built trunk networks in Golden Bowl areas and New Territories Customer access networks Direct fibre connections to buildings Type II interconnection (connection to local loops of incumbent operator PCCW-HKTC) 14
15 Local Fixed Communications (Cont d) Initiatives in Hong Kong Promote competition in residential line services Commitments by existing wireline local fixed network operators to cover at least 50% (aggregate) of residential customers by end Further entry of new players by 1 January
16 Internet Number of dial-up access accounts 2.1 M (May 01) 30% Singapore 49% PC home percentage 49.7% (March 2000) Internet connected homes 36.4% (March 2000) 16
17 Internet (Cont d) Broadband coverage of households: 95% (by ADSL, fibre-to-building, cable modem) Singapore: 99% according to ida Number of broadband connections 400K (May 01) 400K in Singapore (population 4 M) 400K ADSL lines and 800K cable modem lines in Japan (population 130 M) 39% of households connected to broadband in South Korea 17
18 Internet (Cont d) Initiatives in Hong Kong: to promote broadband connection to Internet Encourage direct connection to buildings Facilitate Type II interconnection for broadband service TA Statement in November 2000 Coordination procedure among operators Interference prevention specifications Open Access for cable television network 18
19 Mobile Communications Six operators, eleven digital networks Mobile number portability from March 1999 Mobile penetration 80% Taiwan 80% Japan 55% 2.5 G (GPRS and IS-95B) launched in 2001 Japan: i-mode based on packet switching a success (37 M users out of population 130 M) 19
20 Mobile Communications (Cont d) 3G Services Spectrum to be auctioned: Sept 2001 Four licences Licences to be granted: before end 2001 Operational: 2002 or 2003 Japan - 3G commercial service: Oct 2001 Singapore - licences issued Apr 2001 Australia - spectrum auctioned Mar
21 Hong Kong s Policies Full liberalization of telecom industry Singapore: Government investment in SingTel and Singapore ONE Market liberalization No foreign ownership Singapore lifted foreign ownership restriction from January
22 Hong Kong s Policies (Cont d) Promotion of competition Light-handed regulation Japan:Traditional strong Government Leadership in MPHPT Singapore: regulator also playing roles of developer and promoter Australia: ACCC general competition authorities, technical regulation in ACA, industry self regulation in technical standards 22
23 Hong Kong s Policies (Cont d) Maximum reliance on market force No limit placed on number of licences (except with constraints) Same policy now adopted in Australia, Singapore and Japan 23
24 Conclusions Hong Kong already served by a world-class telecommunications infrastructure Past liberalization has placed Hong Kong in favourable competitive position Few licences(?); more regulatory intervention (?) Market driven approach best suited to Hong Kong 24
25 Office of the Telecommunications Authority ( 6 September 2001 In Search of Competitive Intelligence Seminar of CLP Power 25
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